Democrats: Small businesses benefit from property tax bill

Feb. 14, 2013

Iowa Senate Democrats offered a plan Thursday to reduce commercial property taxes by $250 million annually, which they contended would be a boon to Main Street businesses.

The new proposal is a broader, reworked version of a bill to offer property tax credits to businesses that was overwhelmingly approved by the Democrat-controlled Senate in 2011. It was subsequently rejected by House Republicans and Gov. Terry Branstad.

“This plan reduces commercial property tax rates for four out of five Iowa businesses to a rate equal to residential property. That’s nearly a 43 percent tax cut,” said Sen. Matt McCoy, D-Des Moines, chairman of the Senate Commerce Committee. “This is a job creation measure that favors Iowa’s small businesses. That’s the key difference between it and other proposals.”

Under the Democrats’ plan, $50 million a year would go into a new Business Property Tax Relief Fund beginning July 1, 2014. A permanent, ongoing appropriation would increase by $50 million each year that the state’s revenue rises by at least 4 percent, reaching a maximum of $250 million per year in reduced property taxes.

McCoy said the proposal would not shift commercial property taxes onto residential property owners and would not affect local schools or public services. State money would replace every dollar of commercial property taxes that would have gone for schools, local governments and community colleges, he said.

A Senate subcommittee meeting on the proposal is scheduled for Feb. 25, said Sen. Joe Bolkcom, D-Iowa City, chairman of the tax-writing Ways and Means Committee.

Branstad has proposed a $400 million package aimed at reducing tax bills on commercial and industrial property and limiting annual increases for all property classes. The percentage of a commercial or industrial property’s assessed value subject to taxes would be rolled back from 100 percent to 80 percent over four years. Under the current system, owners of commercial and industrial properties pay taxes on 100 percent of a property’s market value. Homeowners pay taxes on about half a property’s value.

House Speaker Kraig Paulsen, R-Hiawatha, responded to the Senate Democrats’ proposal by suggesting he was open to considering it. But he added that “if this is about them digging in” to their previous stance on tax credits for commercial property taxes it isn’t helpful. He emphasized that Republicans want reform that will benefit all property tax payers.

One of the problems with the Democrats’ plan is that the Legislature has had a “terrible history” of funding tax credits, and particularly property tax credits, Paulsen said. But he hopes Democrats will keep an open mind toward Republican proposals.

“We need to get something done on behalf of the taxpayers of Iowa,” Paulsen said.

“If our economic development department can’t market that, we need to get a new department of economic development,” Gronstal said.

Tim Albrecht, Branstad’s spokesman, said the governor is pleased that all parties continue to express a commitment to property tax relief.

“The governor will support legislation that does two things: reduces property taxes for all classes of property, and is permanent. This is the test for any property tax legislation. The governor looks forward to working with both the House and Senate to enact property tax reform, because we need it for job creation in Iowa,” Albrecht said.

Under the Senate Democrats’ proposal, four out of five Iowa commercial properties — those valued at $324,000 or less — would be taxed at the same rate as residential properties. The remaining businesses would also be taxed at the residential rate on the first $324,000 of value and then at the existing commercial rate for the remaining value. The tax cut would be fully funded with state dollars.